ARBOC ARBEZ

WHEAT COFFEE WHEAT COFFEE
120 0 120 0
0 30 0 20

8. The terms of trade are 2 units of wheat per unit of coffee,
Arboc should produce which good?
Arbez should produce which good?
9. The terms of trade are 5 units of wheat per unit of coffee,
Arboc should produce which good?
Arbez should produce which good?
10. The terms of trade are 6 units of wheat per unit of coffee. Which country could not gain from trade?

can anybody just tell how we are suppose to do them thankyou..

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To determine which goods each country should produce and which country could not gain from trade, we need to compare the opportunity costs for each good.

Opportunity cost refers to the value of the next best alternative that you are giving up when you make a choice. In this case, it refers to the amount of one good that needs to be given up to produce an additional unit of another good.

Here's how we can solve these questions:

8. The terms of trade are 2 units of wheat per unit of coffee.
To determine which good Arboc should produce, we compare the opportunity costs:
- Arboc's opportunity cost of producing one unit of wheat is 0. Arboc will need to give up no coffee to produce an additional unit of wheat.
- Arboc's opportunity cost of producing one unit of coffee is 60. Arboc will need to give up 60 units of wheat to produce an additional unit of coffee.
Since the terms of trade are 2 units of wheat per unit of coffee, Arboc should specialize in producing wheat.

To determine which good Arbez should produce, we follow the same process:
- Arbez's opportunity cost of producing one unit of wheat is 0. Arbez will need to give up no coffee to produce an additional unit of wheat.
- Arbez's opportunity cost of producing one unit of coffee is 40. Arbez will need to give up 40 units of wheat to produce an additional unit of coffee.
Since the terms of trade are 2 units of wheat per unit of coffee, Arbez should specialize in producing coffee.

Therefore, Arboc should produce wheat and Arbez should produce coffee.

9. The terms of trade are 5 units of wheat per unit of coffee.
We follow the same process to determine the goods each country should produce:
- Arboc's opportunity cost of producing one unit of wheat is 0, and for coffee is 60.
- Arbez's opportunity cost of producing one unit of wheat is 0, and for coffee is 40.
Since the terms of trade are more favorable to Arboc (5 units of wheat for 1 unit of coffee), Arboc should specialize in producing coffee, and Arbez should specialize in producing wheat.

10. The terms of trade are 6 units of wheat per unit of coffee.
We compare the opportunity costs again:
- Arboc's opportunity cost of producing one unit of wheat is 0, and for coffee is 60.
- Arbez's opportunity cost of producing one unit of wheat is 0, and for coffee is 40.
Since the terms of trade are more favorable to Arbez (6 units of wheat for 1 unit of coffee), and Arbez's opportunity cost for producing coffee is lower than the terms of trade, both countries can gain from trade. Both countries should specialize in producing the good in which they have a comparative advantage (Arboc produces coffee, Arbez produces wheat).

I hope this helps! Let me know if you have any further questions.